Question

In: Finance

Suppose your company has opened a futures position in the Brazilian Real futures contract traded on...

  1. Suppose your company has opened a futures position in the Brazilian Real futures contract traded on the CME Group. One contract is worth 100,000 Brazilian Reais, and the price quote is given as # USD per 1 Brazilian Real. Suppose today’s futures price for the Brazilian Real futures contract that expires in October is ‘0.1883’. If the daily changes in the settlement prices over the next 5 days turn out to be 0.0015, 0.0010, -0.0005, 0.0020, and -0.0025 (quoted on same basis as the price--#US$ per 1 Brazilian Real), what would be the total marking-to-market change in the value of the contract over the 5 days? If your company was long Brazilian Real, would it have gained or lost from this marking-to-market change in value (assume 1 contract)?

Solutions

Expert Solution

Present day value = 1BR =.1883
Present Contract worth 100,000 * .1883 = 18830 USD

daily price changes

Day Rate Of price Change Investment Value Daily
1 .0015 1.0015*.1883 =.18858245 100000*.18858245
2 .0010 1.0010* .18858245 =.188771 100000*.188771
3 -.0005 .9995*.188771 =.1886766 100000*.1886766
4 .0020 1.0020*.1886766=.189054 100000*.189054
5 -.0025 .9975*.189054 = .18858 100000* .18858

Investment Value

Present 1,00,000 *.1883 = 18,830 USD

Day 5 1,00,000*.18858 = 18,858 USD

The Contract will br in profit of 28USD at the end of day five


Related Solutions

You are considering a futures position in the futures contract written on the STAR Index. This...
You are considering a futures position in the futures contract written on the STAR Index. This is an index consisting of technology stocks that specialise in inter-planetary travel, and the current index level is 18,746. Assume that is possible to short sell the index. The future value of dividends expected to be paid over the next year is $376 and the 1-year interest rate is 4%. d. It is also possible to trade in options contracts on the STAR Index....
Katie has a long position in one December beans futures contract. The contract size is 5,000...
Katie has a long position in one December beans futures contract. The contract size is 5,000 bushels. Each contract requires an initial margin (IM) deposit of $200 and a maintenance margin (MM) of $120. Assume the initial contract price is $2/bushel. a. If the contract price increases by 2 cents on Day 1, calculate the gain or loss of Katie and the new balance (margin) at the close of Day 1. b. Does Katie need to take some action at...
Suppose you enter into a short position in 6-month futures contract on 100 ounces of gold...
Suppose you enter into a short position in 6-month futures contract on 100 ounces of gold at a futures price of $1,863 per ounce. The initial required margin is $5,000. Two months after establishing the position, you notice that the futures price at the end of the trading day is now $1,844 per ounce. What is the rate of return in your account considering the initial deposit of $5,000 that you made? (Note: You are asked for a rate of...
Suppose on March 1 you take a long position in a June crude oil futures contract...
Suppose on March 1 you take a long position in a June crude oil futures contract at $50/barrel (contract size = 1,000 barrels) . How much cash or risk‐free securities would you have to deposit to satisfy an initial margin requirement of 5%? Calculate the values of your commodity account on the following days, given the following settlement prices: 3/2 $50.50 3/3 50.75 3/4 50.25 3/5 49.50 3/8 49.00 3/9 50.00 If the maintenance margin requirement specifies keeping the value...
an investor takes a long position in one futures contract on gold, when the futures price...
an investor takes a long position in one futures contract on gold, when the futures price is $1900. one contract us for 100 troy ounces of gold. the contract is closed out when the futures price is $1,960. which is true? investor made a loss of $4000 investor made a gain if $6000 investor made a loss of $6000 investor made a gain of $4000
You have entered a short position in an oil futures contract. The contract size is 1,000...
You have entered a short position in an oil futures contract. The contract size is 1,000 barrels for each contract. The initial margin required is $20,000 per contract. The maintenance margin is $16,000. The contract is entered at market close on January 7 at a price of $100/barrel. Fill in the table below. If a margin call occurs, indicate in the margin call column the amount that has been added to the margin account as a result of the margin...
Suppose that an investor enters a long position in futures on date 0. If the futures...
Suppose that an investor enters a long position in futures on date 0. If the futures price increases on date 1, the investor's margin account balance will increase. Group of answer choices True False
Explain the difference between a put option and a short position in a futures contract.
Explain the difference between a put option and a short position in a futures contract.
An investor takes long position in five August Gold futures contract. Each contract size is 100...
An investor takes long position in five August Gold futures contract. Each contract size is 100 troy ounces. Futures price is $1356.20. Initial margin requirement is $3,500 per contract and the maintenance margin is $2,500 per contract. Find out at what price the margin call will take place? After the margin call, how much the investor will have to deposit in the margin account?
Consider a long position of five July wheat contract futures contract each of which covers 5,000...
Consider a long position of five July wheat contract futures contract each of which covers 5,000 bushels. Assume that the contract price is $2.00 per bushel and that each contract requires an initial margin deposit of $150 and a maintenance margin of $100. Compute the margin balance for this position after a 2-cent decrease in price on Day 1, a l-cent increase in price on Day 2, and a l-cent decrease in price on Day 3.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT